Section 7 IBC Application by Financial Creditor

Introduction

Section 7 of the Insolvency and Bankruptcy Code, 2016 lets a financial creditor — alone or jointly — trigger the Corporate Insolvency Resolution Process against a corporate debtor on proof of a debt of INR 1 crore or more in default. Unlike Section 9 (operational creditors), the existence of a "dispute" is no defence. The Adjudicating Authority's enquiry is narrow: is there a debt, did it become due, did the debtor default? If yes, admission is near-automatic. The application's quality decides whether admission takes weeks or years.

When to Use This Prompt

• A bank, NBFC, or debenture trustee seeks to recover a defaulted loan exceeding the threshold.
• A homebuyer or class of allottees triggers CIRP under the Pioneer Urban Land judgment (2019) 8 SCC 416.
• A consortium of financial creditors moves jointly under the second proviso to Section 7(1).
• Other recovery routes (DRT, SARFAESI) have failed or are inadequate given the debtor's overall solvency.

Statutory & Case-Law Backdrop

IBC, 2016 — Section 4 (threshold), Section 5(7)–(8) (financial creditor and financial debt), Section 7 (initiation by financial creditor), Section 14 (moratorium), Section 238A (Limitation Act applies). Adjudicating Authority Rules, 2016 — Rule 4 and Form 1. Key judgments: Innoventive Industries v. ICICI Bank (2018) 1 SCC 407 (limited enquiry of NCLT); Swiss Ribbons v. Union of India (2019) 4 SCC 17 (constitutional validity); Dena Bank v. C. Shivakumar Reddy (2021) 10 SCC 330 (extension of limitation via acknowledgements); Vidarbha Industries v. Axis Bank (2022) 8 SCC 352 (NCLT discretion — subsequently clarified by IBC Amendment).

The Prompt

Paste into ChatGPT, Claude or Gemini. Replace every bracketed placeholder with your specific facts before generating.

Draft an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, before the National Company Law Tribunal at [BENCH], in Form 1.

Inputs:
- Financial Creditor: [NAME, NATURE — BANK / NBFC / DEBENTURE HOLDER / HOMEBUYER ALLOTTEE etc.]
- Corporate Debtor: [NAME, CIN, REGISTERED OFFICE]
- Particulars of financial debt: [DATE OF DISBURSEMENT, AMOUNT, INTEREST RATE, SECURITY]
- Date of default: [DATE — must be after 25 March 2020 cut-off and threshold of INR 1 crore satisfied]
- Loan documents: [SANCTION LETTER, LOAN AGREEMENT, DEED OF HYPOTHECATION, STATEMENT OF ACCOUNT]
- Record of default: [NeSL CERTIFICATE / BANK STATEMENT / CIBIL / BALANCE CONFIRMATION]
- Proposed Interim Resolution Professional: [NAME, IBBI REG NO., WRITTEN CONSENT IN FORM 2, AFA VALIDITY]

Form 1 structure:
- Part I: Particulars of applicant and corporate debtor.
- Part II: Particulars of proposed IRP.
- Part III: Particulars of financial debt — total amount in default with date and computation.
- Part IV: Particulars of financial debt documents — list of documents annexed.
- Part V: List of evidence including NeSL record of default (mandatory post Dena Bank v. C. Shivakumar Reddy, (2021) 10 SCC 330 and 2022 amendment).

Plead specifically: existence of debt, occurrence of default, threshold under Section 4 (INR 1 crore), limitation under Article 137 of Limitation Act (Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (2020) 15 SCC 1).

Anatomy of the Draft

Why the prompt is built the way it is — section by section.

Common Mistakes to Avoid

• ×Filing without NeSL record of default post-2022 amendment.
• ×Aggregating multiple debts to cross the INR 1 crore threshold when each is barred by limitation.
• ×Form 1 left incomplete on security particulars — leads to repeated curing orders.
• ×Choosing an IRP without valid AFA on filing date.

Frequently Asked Questions

Final Thoughts

A Section 7 petition is won at the drafting table. Establish the debt, prove the default with NeSL data, plead limitation expressly, and pick an IRP whose AFA is current. The Code does the rest.